What is Passive investing again?

Sometimes known as a buy-and-hold strategy, passive investing requires good initial research, patience and a well-diversified portfolio.  Unlike active investors, passive investors buy a security and typically don't actively attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the overall investment will end up being profitable.

With passive investing, you don’t worry about what the price of gold is doing this week. Nor do you spend days buried in company reports trying to evaluate stocks. There’s no need to time the market, pick winning companies, or convince yourself that you have the special powers required to beat other investors. 

As a passive investor, you refuse to play The City’s game instead you use low-cost funds like index trackers called to reap the market’s return and increase your investments slowly.  There really is also a huge amount of evidence showing passive investing is the strategy that usually comes out top compared to believing the latest hot fund manager or investment scheme will be able to beat the market.

Passive investing is also as simple as investing gets. You need not have more than a handful of funds in your portfolio as long as they are spread across the key asset classes.  Passive investing is increasingly the first choice for many investors, with net sales of tracker funds in the UK reaching a record levels over recent years. Enable's experienced Independent Financial Advisors can help you take a look at whether passive investing is the way forward for you.


Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Will 2014 be another bumper year in the stock market?

For stock market investors, 2013 was not a bad year. Enable’s IFAs and our passive investment philosophy saw the FTSE 100 deliver gains of around 10%, and when you add in dividends, the return was closer to 13%.  The US markets fared even better with the Dow Jones reaching all-time highs and posting a 26% gain, its biggest percentage rise for 18 years.

 It would seem that essentially last year investors finally began to believe that an economic recovery was underway. Without a crystal ball it is impossible to see what is in store for the rest of 2014 but there is defiantly a stronger global economy. The US and UK are building momentum, the EU is climbing out of recession and into growth even if it is slow.  Many think Asia should begin to re-accelerate.  Liquidity is still fairly abundant in the financial system and while stimulus is likely to be trimmed (QE tapering), the Fed is expected to counter this with strong forward guidance – assuring the markets that interest rates will stay at rock bottom levels for the next few years. As Mark Carney has done recently in the UK.  Another factor is that the corporate sector having bee understandably cautious for the last 5 or so years has quite a lot of cash floating around. Rather than invest their profits in expansion, companies have been distributing record dividends or simply allowing cash to pile up. Data from the Bank of England at the beginning of the year showed  that the bank deposits of non-financial corporations rose more than five-fold from £76 billion at the end of 2008 to £419 billion by July 2013. If businesses put that money to work, we see huge scope for profit upgrades.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

How to Invest passively

When most people think of an investment fund manager, they imagine a city professional staring at a screen of numbers yelling "buy" or "sell". It involves a human element of decision making; someone who is taking strategic decisions about whether to hold the shares of a certain company within the fund, trying to constantly achieve the optimum mix of shares and other assets to give their investors top returns. The human element in markets means that no fund manager will outperform year in year out. And naturally, this extra involvement doesn't come for free, so actively managed funds are generally more expensive than their passive equivalent and as much research shows they do not  regularly outperforming, the markets.

At Enable we believe Passive investments work best for wealth management; you might as well just track an index at a much lower cost, safe in the knowledge that whilst you probably won't outperform the market, your investments are less likely to significantly underperform the market, giving you peace of mind that your portfolio performance will always be there or thereabouts. Choosing a passive fund usually starts with deciding which index to track, such as the FTSE 100.



Needless to say, there are different types of passive funds. The funds which will most closely resemble the index they are tracking are known as full replication; they hold the same proportion of every share that makes up the index they are tracking. This is a simple but effective way of following an index. However, for smaller funds it can be so expensive to buy so many different shares that the charges would simply cancel out the lower cost benefit of a passive fund. As a result, these smaller funds will often buy a selection of shares to try and simulate the market, but this of course involves decision making about which shares to buy; again introducing the human element and possibility of underperformance compared to the market. The true benefits of passive investment for any portfolio are to try and achieve accurate index tracking with very low charges something Enables IFA’s  of Bishop’s Stortford will always be trying to do for you.


Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE